Delaware Needs a New Emphasis on Housing Affordability

BY KEVIN KELLY

RISING MORTGAGE RATES and little or no abatement in material and labor costs will continue to be strong headwinds for the home building industry through 2023. As a result, housing production in Delaware is down 31 percent (year to date).

Even without the significant run up in mortgage rates, tens of thousands of Delawareans as well as families across the country are facing a “housing affordability crisis”. Housing supply is simply falling short of needs. The mortgage giant Freddie Mac estimates the shortage to be 3.8 million homes. Other studies estimate the number is closer to five million. While there is nothing state and local policymakers can do to change the trajectory of mortgage rates, there are steps they can take to make housing more affordable.

A major driver of high housing prices is unreasonably stringent land-use policies that hurt affordability and reduce critically needed housing supply. Local land use regulations have made it more expensive and time consuming to develop lots for new homes. This irrefutable, incontrovertible fact is cited by various major think tanks (CATO and Brookings), universities (Penn/Wharton and Harvard Joint Center for Housing Study), and nationally renowned economists such as Mark Zandi. In fact, this year the White House issued a statement that said in part: “Land use and zoning policies constrain land use, artificially inflate prices, perpetuate historical patterns of segregation, keep workers in lower productivity regions, and limit economic growth.”

The National Association of Home Builders (NAHB) has found that 25 percent of the cost of building a new single-family home and up to 40 percent the cost of multifamily housing is regulatory compliance.

Regrettably, the affordability crisis most severely impacts low-income families in our state. According to data from the National Low Income Housing Coalition, more than 27,000 Delaware families pay more than 50 percent of their income for housing—a shocking statistic.

Possible Solutions

Bringing back starter homes is a good place to begin. The starter home was always meant to be a young person or family’s first foray into home ownership: a smaller, more affordable home that allows a homeowner to start building equity toward something for the long term. We commend the Governor on leveraging ARPA funds to support the Catalyst Fund, designed specifically to further affordable homeownership.

However, in recent years, the starter home has gone by the wayside due to high building costs. In the face of a crisis and a large generation entering prime home buying age, this is the exact type of housing we need to meet these demands.

Another solution is to increase multifamily building activity. Multifamily housing built at scale allows builders to produce homes more economically and is a key component to resolving the housing affordability crisis. A shortage of multifamily rental units prevents lowand moderate-income families from finding housing that meets their needs at a price they can afford.

Working Together

The market is ripe for more affordable homes and apartments. But it needs help.

Policymakers at the state and local level can help by enacting policy that incorporates the Biden Administration’s recommendations to reducing regulatory barriers that discourage production of starter homes and more affordable apartments.

Lastly, we can all work to reduce “NIMBYism”—not in my back yard— in our neighborhoods by recognizing that increased density, which means increased housing opportunity, is good for everyone.

Kevin Kelly is chairman of Leon N. Weiner Associates (LNWA), a homebuilding, development, and property management firm. He has served on Fannie Mae’s Affordable Housing Advisory Council and HUD’s Housing Affordability & Transportation Review Panel, as chair of the Board of the National Association of Home Builders, and president of Home Builders Association of Delaware. He was also inducted into the National Housing Hall of Fame in 2021.